4.5. Reconciliation

Once transactions have been entered into GnuCash, it is important to verify
that they agree with the records of your financial institution. This
verification process is known as reconciliation, and it is key to determine
whether your records are accurate. Most commonly, you will check transactions
against bank statements, although you can use this process to verify any
transaction.

GnuCash keeps track of the reconciliation status of each
transaction. The reconciliation status of a transaction is shown by the
reconciliation R field in a register:
y indicates that a transaction has been
reconciled, n indicates that it has not, and c indicates that it has
been cleared, but not reconciled. You can toggle the reconciliation status
between n and c by clicking in the R field; you can set
it to y by using Section 4.5.1, “Reconcile windows”.

At the bottom of the account window, there are (among others) two running
balances (the cleared and reconciled balance), and the
total balance. The formers balances should correspond to how much money
the bank thinks you have in your account, while the latter includes outstanding transactions.

For example, when you write a check for something, you should
enter the transaction into GnuCash. The reconciliation R field of the
transaction will initially contain n (new). Your new entry will
contribute to the total balance, but not to the cleared and
reconciled balance. Later, if you think that the check has been cashed,
you might click on the transaction’s R field to change it to c
(cleared). When you do this, the cleared balance will
change to include this amount. When the bank statement arrives, you can
then compare it to what you’ve recorded in GnuCash by opening the reconciliation
window. There, you will be able to change the R field to y (reconciled).

Note

You cannot reconcile directly in a register window by clicking in the R field. You must use the
reconciliation window. Once a transaction has been marked reconciled,
it can no longer be easily changed without breaking the
Starting Balance of the next reconciliation.

Note

It is important to understand that reconciliation is done for a given
date, and when you reconcile an account based on a statement from a given date,
you are reconciling all transactions prior to that date. Therefore, if you
add or modify transactions that predate your last reconciliation, your
reconciled balances will be thrown off.

4.5.1. Reconcile windows

The reconciliation windows are used to reconcile a GnuCash account
with a statement that a bank or other institution has sent you.
Reconciliation is useful not only to double-check your records against
those of your bank, but also to get a better idea of outstanding
transactions, e.g. uncashed checks.

To use the reconciliation windows, select an account from the
account tree and click on Actions → Reconcile. A window like the one below will appear in which you can
enter the reconcile information.

The initial reconcile window.

In the initial reconcile window, some Reconcile Information need to be entered.

Statement Date

The date of the statement you will be reconciling against.

Tip

Click on the down arrow in the right of this field to open a calendar

Starting Balance

This is a non-editable item which displays the balance from the previous
reconciliation. It should match the starting balance in your statement.

Warning

Sometimes, the opening balance in GnuCash does not match that
found on your statement. This can happen the first time you reconcile your account or
when a previously-reconciled transaction is de-reconciled or deleted.

Note

The first time you reconcile your account, the starting balance will
be 0.00, thus probably not the opening balance of your account.
When you reconcile the account, the opening balance for the account
will be included in the reconciliation, and the result should balance.

Tip

In the case when a previously-reconciled transaction is accidentally de-reconciled, you can simply
re-reconcile the transaction along with the transactions on the current statement, and the
result should balance.

The case of accidentally deleting a previously-reconciled transaction presents
more of a challenge; if you cannot determine what was
deleted and restore it to the register, you will have to create a dummy
transaction to get the reconciliation to finish.

Ending Balance

This field should be filled with the ending balance as it appears in the statement.

Note

GnuCash automatically fills this field with the
Present balance as shown in the lower part of the
account’s register.

Include Sub-accounts

Check this option if you want to include in the reconciliation the transactions
that belongs to the sub-accounts of the currently selected account.

Enter Interest Payment

Clicking this button opens a new window that allow you to enter an interest transaction to the account to be
reconciled.

Tip

The Interest Payment window might be opened automatically when you start a reconciliation
for an account of the type Bank, Credit,
Mutual, Asset, Receivable,
Payable, and Liability. If you want to disable
this behavior for any of the previous accounts, go to the Register tab of the
GnuCash Preferences and uncheck the Automatic interest transfer
option. Alternatively, to disable this behavior only for the selcted account, press the
No Auto Interest Payments for this Account button in the
Interest Payment window.

Then, click on the Ok button, and you will see
the transactions listing reconcile window:

The transactions listing in the reconcile
window.

The two panes called Funds In and
Funds Out, lists all the unreconciled transactions that belongs to the account
that is going to be reconciled.
The R columns show whether the transactions have been reconciled.

Now, examine each item on the bank statement, and look for the
matching item in the Reconcile window.

If you cannot find a transaction, then perhaps you forgot to enter it, or did not know that the transaction
had happened. You can use the New button on the Toolbar, or the
Transaction → New
menu item in the menu, to open a register window and enter the missing
transaction. The new item will appear in the Reconcile window when you
press the Enter button in the register after entering the transaction.

When you find the item in the Reconcile window, compare the amount
in the item to the amount on the statement. If they disagree, you may
have made an error when you entered the transaction in GnuCash. You can
use the Edit button on the Toolbar, or the
Transaction → Edit
item, to open a register window and correct the transaction.

If the amounts agree, click on the item in the Reconcile window.
A check mark wil appear in the R column aside the selected transaction.
GnuCash will automatically update the amounts in the lower right summary pane.

Tip

You can use the up/down arrow keys to scroll to the item, the
space key to mark the item as reconciled and the Tab
key to switch panes.

You then repeat this for each item that appears on the bank
statement, verifying that the amounts match with the amounts in GnuCash,
and marking off transactions in GnuCash as they are reconciled.

At the bottom of the Reconcile window there is a Difference field,
which should show 0.00 when you are done reconciling. If it shows some
other value, then either you have missed transactions, or some amounts
may be incorrect in GnuCash. (Or, less likely, the bank may have made an
error.)

When you have marked off all the items on the bank statement, and
when the difference is 0.00, press the Finish button on the Toolbar or
select Reconcile → Finish from the menu.
The Reconcile window will close.
In the register window, the R field of the reconciled transactions will
change to y.

In this case, we have not received all the information yet, so we
simply press the Postpone button, so we can continue at
a later stage. Observe that the R column indicates we cleared (c)
two transactions. They have not been reconciled yet, but we have
verified these two transactions so they have been marked as cleared. If
you look at the Statusbar at the bottom of the account register, you
will see a summary of what has been reconciled and what has been cleared
(Cleared:USD 954.79 Reconciled:USD 0.00)